Is Facebook Near Its Peak?

Facebook (FB) has justified its towering valuation by reporting strong growth. With the stock regularly beating it 52-week highs, investors may be wondering when the company’s stellar run will come to an end. While it is impossible to predict Facebook’s peak, I think the stock still has considerable upside to offer, and investors should continue holding it at least for a few more quarters.

Inevitable Growth

Obviously, Facebook’s business is heavily dependent on users; therefore, it is mandatory for the company to have an exciting and promised user community so as to produce unrelenting growth in earnings as well as revenue.

In the most recent quarter, the company reported that its monthly active users base has reached 1.71 billion, a surge of 15 percent compared to that in the second quarter of 2015.

On the other hand, Facebook is outperforming its rivals by a considerable margin, as its competitor Twitter has a user base of just 313 million monthly active users.

Despite being small in size, Twitter is considerably underperforming as compared to Facebook in terms of growth. In the last quarter, Twitter managed to surge its user base by just 3 percent y-o-y.

Image by Simon / Pixabay

As an outcome, the massive gap between both the companies user growth is possibly one of the chief reasons why Twitter stock is down and Facebook stock is thriving. Yes Twitter (TWTR) did get an acquisition offer last week, but the stock has still underperformed as compared to Facebook.

Moreover, it is well known that virtual reality is one such market that is evolving at a rapid pace, and Facebook is putting in a lot of effort to grasp a leading position in the VR market as well. Two years ago, Facebook bought Oculus VR for $2 billion. Due to this, Facebook has turned itself into a leading VR company, as it launched the first high-end VR headset with the Oculus Rift and the first VR app ecosystem with Oculus Home.

According to Piper Jaffray forecast, Facebook will sell around 3.6 million Oculus Rift in full year 2016, and the company detailed that it has formerly launched 250 apps in Oculus Home, which also works for Samsung’s mobile-based Gear VR headsets.

The reason why Facebook decided to offer its VR apps for Samsung’s mobile based Gear VR is that Samsung’s Gear VR is available for just $99 that costs considerably less than the $600 Rift. Moreover, Piper projects that Samsung will sell around 5 million Gear units in 2016.

Conclusion

Going forward, it seems like Facebook still has a lot of growth opportunities. As a result, I think investors should continue holding the stock.